CRM: The Key to Improve Customer Retention & Boost Profit

Apr 20, 2017


When you are managing a small or mid-size business, sales numbers and bottom line are often your greatest concerns. However, in today’s business climate where customer acquisition cost is ever-increasing, it is surprising to see how few businesses are proactively focusing on customer retention.

A study conducted by leading market research firm Econsultancy in 2014 presents the below figure:



Source: Econsultancy

As per the study, 40% of total respondents were more focused on new customer acquisition, while 45% of the participants gave equal importance on acquisition and retention of customers. Only, 15% of the businesses were more focused on customer retention and were employing customer retention strategies to achieve their goals.

Now, if your business belongs to this 15% retention-oriented-segment, congratulations, you are heading towards the right direction!

If not, don’t lose hope!

There exists one simple tool (that you probably are using right now) that can help you understand your customer retention rate and improve it significantly. Your good old CRM!

But, before we jump into explaining how you can use your CRM to improve your customer retention, let us first discuss why it is so very important for the bottom line of any business.

Why is Customer Retention Important for You?

In 1990, Bain & Company and Earl Sasser of Harvard Business School conducted a research to demonstrate how exactly retention rate impacts the bottom line. The study revealed a sensational data:

Increasing customer retention rates by 5% increases profits by 25% to 95%.

The data (as expected) made businesses all around the world rush into creating customer retention strategies.

While increased profit is definitely a high-value incentive, the cost of acquiring new customer vs retaining existing customers is significant too.

A study conducted by Superoffice says the cost of acquiring a new customer is at least 6 to 7 times higher than that of selling to your existing customers.




To sum it up, focusing on customer retention is not only a wise financial move but also have the potential to dramatically increase your profit figures.

But, How do you Know Your Customer Retention Rate?

You can calculate your customer retention rate with a very simple mathematical formula:

{(CE-CN)/CS} X 100 = Customer Retention Rate


CE = Number of customers at the end of any given time period

CN = Number of new customers acquired during the time period

CS = Number of customers you had in the beginning of the time period

For example, if you are trying to calculate your customer retention rate for the last financial year, where your CE = 300, CN = 100 and CS= 250, then the formula will look like this:

{(300-100)/250} X 100 = 80

So, your customer retention rate for the last financial year was 80%.

Now, whether this retention rate is great or poor for your business depends on several factors such as the industry you are operating in, business model you follow, products you offer etc.

But, in general, most businesses like to keep their retention rate as high as possible!

Now the question is, how to Improve Customer Retention Rate for your Business?




Well, the picture may be a bit cheeky, but yes, you do not need to invest in any fancy software for this crucial function.

The CRM that you are presently using (if you are not using a CRM yet, get in touch with our CRM experts to get a super simple CRM tailored for your business) is a powerful tool for developing effective customer retention strategies.

As per a recent survey by Superoffice, 68% of customers leave their service providers because they believe the company does not care about them.



Source: Superoffice

Going by this report as well as everyday business experience, making your customers FEEL important is the key to improve customer retention in any industry.

So, here are some proven tips on how to use the power of CRM to create smashing customer retention strategies:

#1. Create personalized offers for your existing customers

In an effort to acquire new customers, most businesses tend to offer lucrative discounts and deals. However, when it comes to existing customers, very few businesses proactively extend value-added offers.

But, think again, you have little to no idea about the preferences, purchase patterns or priorities of a new lead. And yet, you bombard him/her with offers, deals and discounts, hoping to acquire him/her as a customer. You spend a significant amount of time and money creating PPC advertisements, social media advertisement, e-mail campaigns and may be other offline advertisements to get his/her attention.

While aggressive customer acquisition strategy has its own importance, most companies tend to devote almost all their resources for the same. As a result, they have almost negligible bandwidth when it comes to their existing customers.

Here, the amazing thing is, you don’t even have to beat around the bush to know what your existing customers love.

Pick any customer you want to target, look into your CRM and voila!

You have every information about the customer right there. You know his/her purchase pattern, product preferences, price sensitivity, how frequently he/she visits your website, how many support request he/she has placed, even the time and date of his/her last purchase.

In short, you know everything that you need to know, to make an offer the customer cannot refuse!

By making personalized offers based on CRM intelligence, you not only increase the chance of conversion manifolds but also make the customer feel super-special.

Pro tip: Your CRM is the goldmine for customer intelligence; put it to full use by creating personalized “only-for-you” offers to your customers.

#2 Identify Your High-Value Customers and Direct Your Marketing Efforts Towards Them

Well, as per the Pareto principle, 80% of a company’s profit comes from 20% of its customers. Identifying and retaining these 20% high-value customers is crucial for your business’s growth.

A simple search in your CRM software is enough to reveal who these high-value customers are. Once you have the list in your hand, you can further segregate the list into active and inactive high-value customers.

While you may or may not make some special effort towards the active high-value customers (those who have been making repeat purchases regularly) right at this moment, it is crucial that you get in touch with your inactive high-value customers (those who have not purchased or placed a support request in past six months) and bring them back to your business.

Depending on the industry you are working in and the importance of the customer in question, you can take various actions to bring the customer back.

For example, if you are operating in the B2B field and the customer in question has a huge account, a personal phone call or even an office visit can be a great idea to find out what’s happening. In case you are running an eCommerce business, a personalized ‘miss you’ email with a great discount coupon can be a good solution too.

Pro tip: Your aim is to leverage the power of your CRM to identify the high-value accounts who have been silent for some time and go full-throttle to stop them from leaving your business.

#3 Use Your CRM to Create Lasting Relation with Your Customers

Your customers are not just numbers, and if you see them that way, you’ll never ever be able to create a relation with them!

After all, relations are established between two persons. But how do you keep track of all the nitty-gritty details of your customers’ lives, especially when you have a large number of customers and a small sales team?

CRM to rescue again!

Most great sales persons use CRM to note down personal information about the customers. This not only helps you start a conversation on common ground but also help you create highly personalized follow-up communication.

Another great way of leveraging the power of CRM to foster customer relation is to send out some love on special days.

For example, if you are a lifestyle brand, sending out well-designed e-mails on your customers’ birthdays and anniversaries will help you foster better relation with them. You can take it a step further by offering some amazing coupons or discounts to spoil themselves with too.

Pro tip: When your customers feel super special with you, they are less likely to take their business elsewhere and your customer retention rate increases automatically.

Last Words

“People will forget what you said. They will forget what you did. But they will never forget how you made them feel.” Maya Angelou, Author and Poet

The above statement holds true for your customers too!

Most of your customers will come back to you for repeat purchase if you can make them FEEL special. While there is no tool that can create the human touch for you, the CRM is the ultimate solution that can help you in your quest of customer retention.

The invaluable insight and understanding that CRM offers help you in targeting specific customers, create personalized offers and foster a stronger relation with them.

Use it well and the CRM can become a powerful customer retention tool for your business!

Yet to implement a CRM? Get in touch with our experts now, to get CRM solutions tailored for your business!

Schedule an Online Meeting